VAT Guide to Value Added Tax - sri lanka inland revenue ...

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to indicate the date of payment of cash, in the case of cash basis taxpayers, and a column to indicate whether the input is directly attributable to an exempt supply. Appendix – 3 Proposed Changes to VAT Law 1. Following changes and amendments have been proposed to the VAT Act which includes mainly the changes proposed by the Budget speech presented to the Parliament on 06.11.2002 2. VAT on Retail and Wholesale Trading VAT will be introduced to retail and wholesale supply of goods with effect from 01.07.2003. Section3 of the Act will be suitably modified. 3. VAT on Financial Services The financial services which are presently exempted under items (xi)(a) to (xi)(h) of the First Schedule read with Section 8 of the VAT Act will be liable to VAT with effect from 01.01.2003 provided such services are supplied by “specified institutions” – namely (a) A Licensed Commercial Bank within the meaning of the Banking Act NO. 30 of 1988 (b) A Finance Company registered under the Finance Companies Act No. 78 of 1988. (c) A Licensed Specialized Bank within the meaning of Banking Act NO. 30 of 1988. However it has been proposed to use the “additive model” (i.e wages + profits) and not the substrative model i.e (Output – Input) as discussed in para 9.2 as the base for calculating the tax. Thus the banks and financial institutions will have to compute their profits monthly in order to adopt this method as they will be required to furnish monthly returns. A separate Chapter will be introduced to the VAT Act to deal with taxation of financial services for VAT purposes. However the Life Insurance, Agrahara insurance and crop insurance as specified in item (xi(i) will continue to be exempted. Any financial services supplied by other institutions too will continue to be exempted. Eg. Commission charged for exchange of foreign currency by approved money changes and tourist hotels. 176
4. Import of Ships Exclusion from VAT as per Section 2(3) (e) will be applicable (Vide Para 2.4.1)only till 31.12.2002. Any ship imported thereafter will be eligible for deferment of VAT by the Customs for a period of 36 months which should be settled in quarterly installments. Other requirements, such as furnishing of a bank guarantee etc., as are required in other cases of deferment, are applicable. The second proviso to Section 2(3) will be suitably amended. 5. Local Sale of Garments by Manufacturers Cum Exporters of garments – Sec. 22(1) This facility will be extended to non-BOI Sector exporters as well. They will therefore be required to make such sales, through a Cus-Dec with the approval of the Customs/BOI and charge 25/- per piece as VAT which will be collected by the Customs from the buyers. This 25/- is the output tax of the manufacturer and the same procedure as in explained in para 9.3 is applicable. 6. Input tax on Motor Vehicles Section 22(6) will be amended to allow 50% of the input tax in respect of Motor vehicles used in a taxable activity – effective from 01.01.2002. 7. Issue of Assessments Section 28 & 33 will be amended by deleting last para of Sec. 28 and introducing at the end of Section33 the following paragraph “For the purpose of this Chapter any notice of assessment may refer to one or more taxable periods”. This will enable an assessment or an additional assessment to be issued covering several taxable periods 8. Assessments for Fraud and willful evation - Time Bar No assessment can be made on fraud or willful evasion if detected after 5 years. 9. Appeal settlement period – Sec. 34 The period within which appeal to be settled will be reduced to two years. 10. Board of Review – Sec. 35 177
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But for the best to the September 0
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Preface The Value Added Tax Act was
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Chapter - 1 Introduction 1.1 Purpos
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However from the point of view of t
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The following test which has been a
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iv. Import of any fabric, yarn, gre
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Chapter - 3 The definitions of conc
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Eg. 1 : If “A” wants to termina
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c. Time of supply in relation to su
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Thus, any trade, business, etc. are
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a business in Sri Lanka and not to
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When the recipient is not a registe
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• There are two types of registra
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(ii) continued without making an ap
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(d) (e) (f) input credit has been c
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4.13 Activity Code Number “Suppli
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the H.S. classification it may be b
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5.8 Payment of tax on Assessments T
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5.11. Collection of VAT on Imports
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6.3 Approval For Deferment Facility
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iv. If an importer declares only pa
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6.6 Deferment on Local Supplies (Te
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7.4 Tax Invoice Tax invoice should
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7.11 Use of tax fraction to compute
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Lower Rate - 10% Goods and services
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Chapter - 9 Calculation of Tax 9.1
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accounted for in respect of all the
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transferred to a taxable activity a
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Eg. If A is an ice-cream vendor who
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(3) In the above case if the regist
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• claim (deduct) only the allowab
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• “Value of Supply” has to be
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VAT chargeable = 900,000 x 20% = 18
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• The Director General of Customs
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10.5.6 Milk - item (iv) • Liquid
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(i) Insurance - xi(i) • Only the
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in Sri Lanka and consumed in Sri La
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Chapter - 11 Refunds 11.1 Unlike in
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11.7 Set off of refunds against fut
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• To make an additional assessmen
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a genuine taxpayer who does not wis
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Penalties Tax payers should comply
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15.3 Keeping of records regarding e
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15.8 Example of a VAT Account VAT A
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the trading house or the other pers
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16.4 Concessions available to Expor
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v. Importation of services are not
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Chapter - 17 Hire Purchase Transact
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(a) Under the existing provisions V
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y the hire-purchase company to the
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Chapter - 18 Leasing & VAT 18.1 Lea
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installments. Any VAT not recovered
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18.13 Leasing inputs • Leasing in
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18.15 Leasing Advance Sometimes it
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Thus output tax of B on the termina
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Chapter - 19 Mortgages 19.1 Mortgag
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• Services provided by internatio
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Chapter - 21 Some Obligations Under
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However an adjusted figure must be
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Chapter 23 Construction Contracts 2
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Government agencies mentioned above
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Chapter - 24 Rulings 24.1 Following
Page 126 and 127: • None of the companies covered b
Page 128 and 129: which he has supplied to the garage
Page 130 and 131: instructions can be exempted if suc
Page 132 and 133: ii. iii. any other registration tha
Page 134 and 135: i. Membership fees and or subscript
Page 136 and 137: Chapter - 25 Zero Rated Supplies 25
Page 138 and 139: (ii) (iii) (iv) Services directly c
Page 140 and 141: Supply of facilities for crew chang
Page 142 and 143: 4. Yard to Port Transporting contai
Page 144 and 145: Chapter - 26 Travel Trade, Tourism
Page 146 and 147: ii. iii. But “travel insurance“
Page 148 and 149: 26.6 VAT ON MICE Tourism VAT rate a
Page 150 and 151: x. Supply of goods & vehicles free
Page 152 and 153: and for VAT purposes the two compon
Page 154 and 155: (i.e the lottery organizer) on whic
Page 156 and 157: The VAT charged on above should be
Page 158 and 159: 1.2.3 Other imported materials exce
Page 160 and 161: The sub-contract awarder should pay
Page 162 and 163: 2.3.1 Imported goods (except fabric
Page 164 and 165: 5.2.2 To BOI garment manufacturing
Page 166 and 167: Annexure - 2 First Schedule to the
Page 168 and 169: 4. Supply of any services to any Di
Page 170 and 171: Services 1. Electricity more than 3
Page 172 and 173: Sale before 01.08.2002 - GST Regime
Page 174 and 175: GST = (CIF + CD + Surcharge + Ex.Sp
Page 178 and 179: The period within which the Board o
Page 180 and 181: Mrs. S.N.P. Abrew - Senior Assessor
Page 182: 182
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